DERICK L. BERRY, Plaintiff-Appellant,
WELLS FARGO BANK, N.A. & HSBC BANK USA, N.A., as Trustee for NOMURA PMSR NHELI Asset Backed Certificate Series 2006-AF1, Defendants-Appellees.
July 6, 2017
from the United States District Court for the Northern
District of Illinois, Eastern Division. No. 15 C 5269 -
Virginia M. Kendall, Judge.
Posner, Kanne, and Sykes, Circuit Judges.
POSNER, Circuit Judge.
the plaintiff, Derick Berry, had taken out a 30-year,
fixed-rate mortgage of approximately $270, 000 to pay for
improvements to his Chicago home. He denies having missed any
payments on the mortgage, but nevertheless the mortgage was
foreclosed later that year. He fought the foreclosure. The
following year HSBC, as trustee of the mortgagee, took over
the foreclosure suit against Berry. Years of protracted
litigation in the Illinois state court system ensued, with
Berry arguing that HSBC did not have the right to foreclose
on his home, that he didn't know how much he owed and to
whom, and that he should have received a loan modification.
He contested a judicial sale of his home in 2010 that the
Illinois court later set aside as premature. And he contended
that HSBC had discriminated against him because of his race
(Berry is African-American), thereby violating the Fair
Housing Act, 42 U.S.C. §§ 3601 et seq.
final judicial sale of the mortgaged property took place in
2015, and while he argued that the defendants had violated
Illinois's notice requirements for judicial sales, the
state court disagreed. Shortly before the sale, Berry had
filed the present, federal suit against both HSBC and Wells
Fargo, his mortgage servicer (a company to which some
borrowers pay their mortgage loan payments and which performs
other services in connection with mortgages and
mortgage-backed securities), accusing them of charging
improper fees, misstating the amount he owed, and
discriminating against him because of his race. He alleges
that he had had difficulty obtaining information from them
about what he owed and to whom, that they had not granted him
a loan modification despite promising to do so, that his home
had been sold prematurely in 2010, and that they had hounded
him for payments that he says he did not owe.
original federal complaint had made claims under the Fair
Housing Act, the Equal Credit Opportunity Act, 15 U.S.C.
§§ 1691 et seq., and the Truth in Lending
Act, 15 U.S.C. § 1639, as well as a number of state
statutory and common law claims including breach of contract,
negligence, and consumer fraud, the basis of federal
jurisdiction over those claims being the supplemental
jurisdiction of the federal courts. The district court
dismissed the federal claims as untimely and declined to
exercise supplemental jurisdiction over the state law claims,
but allowed Berry to file an amended complaint that realleged
many of the same facts but also invoked the court's
diversity jurisdiction and modified several of his state law
claims. By the time Berry had amended his federal complaint,
however, the state court had confirmed the sale of the home.
The court having rendered a final judgment, the defendants
moved to dismiss Berry's amended federal complaint on
several grounds, including claim preclusion. The district
judge obliged, ruling that the amended complaint raised
"the same claims he presented to challenge the
foreclosure in state court: his defaulted mortgage,
subsequent attempts to obtain a modification, alleged
failures in communication with Wells Fargo during those
attempts, and disputes regarding payments and fees related to
the mortgage and his subsequent default." Berry had even
argued in state court, in an unsuccessful attempt to convince
that court to defer to the pending federal litigation, that
his federal lawsuit concerned the same "events and
actions" as the state one. Because judgment had been
entered in state court and the parties were the same or, in
the case of Wells Fargo, in privity with a party (HSBC),
claim preclusion applied; that is, the federal court would
not reconsider claims of Berry's that the state court had
district court allowed Berry to amend his complaint one last
time. The amended complaint alleged most of the same facts as
his earlier complaints, but added a charge that security
officers at the public-housing complex to which he'd
moved after the loss of his home had searched his apartment
unlawfully, though he did not name them as defendants. He
added a state law claim for infliction of emotional distress
but abandoned many of his other state law claims and his
Equal Credit Opportunity Act claim, and having previously
withdrawn his Truth in Lending Act claim his Fair Housing Act
claim was his only remaining federal claim. The district
court concluded that Berry's latest complaint
"rehashe[d] the same arguments and facts that he already
presented to the state court and this Court previously,
" and any new allegations still arose out of the
"same set of operative facts" that the court
already had reviewed. The district court concluded that
Berry's claims were all claim-precluded, thus requiring
dismissal-this time with prejudice-of his suit.
argues that the district court erred by dismissing his suit
on the basis of preclusion. Typically a defendant must
specify claim preclusion as an affirmative defense in his
answer, to be able to avail himself of it, then file a Rule
12(c) motion for judgment on the pleadings. But Berry's
state-court filings gave the district court everything it
needed in order to be able to rule on the defense,
Walczak v. Chicago Board of Education, 739 F.3d
1013, 1016 n. 2 (7th Cir. 2014), and Berry presents no
evidence that the district court neglected to consider
regarding preclusion. See United States v. Rogers Cartage
Co., 794 F.3d 854, 861 (7th Cir. 2015).
Illinois law, claim preclusion bars a second lawsuit when (1)
the first suit resulted in a final judgment on the merits
rendered by a court of competent jurisdiction; (2) the two
suits present the same causes of action; and (3) they have
the same parties or privies. The first and third elements are
met. An order approving a foreclosure sale is a final
judgment under Illinois law. See EMC Mortgage Corp. v.
Kemp, 982 N.E.2d 152, 154 (Ill. 2012). HSBC, one of the
two defendants here, was the plaintiff in the foreclosure
suit. Wells Fargo was not a plaintiff in that suit, but its
interests as the mortgage servicer are no different from
those of HSBC, the legal representative of the mortgagee.
"Typically, a mortgage servicer acts as the agent of the
mortgagee to effect collection of payments on the mortgage
loan. Thus, it will be a rare case in which those two parties
are not perfectly identical with respect to successive suits
arising out of a single mortgage transaction." R.G.
Financial Corp. v. Vergara-Nunez, 446 F.3d 178, 187 (1st
Cir. 2006). Berry gives no reason for believing this case
atypical, so we conclude that there was privity between the
two companies. See Cooney v. Rossiter, 986 N.E.2d
618, 625 (Ill. 2012).
second element (the two suits present the same causes of
action) has also been satisfied; "separate claims are
considered the same cause of action for claim-preclusion
purposes if they arise from a single group of operative
facts, regardless of whether they assert different theories
of relief." Walczak v. Chicago Board of Education,
supra, 739 F.3d at 1016-17. This includes both
"claims actually litigated" and "those that
could have been litigated." Dookeran v. County of
Cook, III, 719 F.3d 570, 576 (7th Cir. 2013).
argues that he had no chance to present in state court the
matters advanced in his federal lawsuit. But he did present
them in state court. His federal complaint and his
state-court filings describe the same "group of
operative facts, " see Rose v. Board of Election
Comm'rs for the City of Chicago, 815 F.3d 372, 375
(7th Cir. 2016). He also argues that the state court wrongly
rejected his motion for leave to file an affirmative defense
under the Fair Housing Act without a detailed written
explanation. But if he was dissatisfied with the state
court's decision or justifications, his remedy was to
appeal, not to start over with a new suit. In any event he
can't avoid his previous concession that the two lawsuits
describe the same "events and actions." See
Parungao v. Community Health Systems, 858 F.3d 452,
458-59 (7th Cir. 2017).
argues that claim preclusion should not apply because
litigating his federal claims would not automatically nullify
the foreclosure sale. See Ross Advertising, Inc. v.
Heartland Bank & Trust Co., 969 N.E.2d 966, 975 (
Ill. App. 2012). But it would, because the federal claims are
designed to change the outcome of the state court proceeding.
alleges one set of facts in his second amended complaint that
he did not allege in the state court: the search of his
public-housing unit. But these allegations describe conduct
by third parties unconnected to Wells Fargo or HSBC, and
Berry doesn't argue that either defendant was responsible
for those parties' actions. Thus although these specific
allegations may form the basis for a claim ...